Cost Basis for Gifted Property

[johnm40]

My mom gifted a piece of property to me that has been in our family for over 50 years.  I "believe" the property was gifted to her and my dad from my grandparents.  I sold the property in 2024.

How do I to a derive the cost basis for the property?  The search of property records only goes back so far online.  My parents and grandparents are deceased so I can't ask them.  

[Opus 17 · Accepted solution]

Unfortunately, the IRS does not have to give you any tax break (including a basis) that you can't prove with reliable records.

The county will have records you can look at in person, if you want to figure it out.

If the property was always only passed by gift, then your basis today is the basis of the original purchaser, way back when.   

If the property was ever inherited, the heirs would have received a stepped up basis equal to the fair market value at the time, but that also can be difficult to prove.  And difficult to trace, if it was inherited by (for example) several siblings, who then gave or "sold" their share so one sibling can be the sole owner.

If you have a mortgage, you probably have title insurance, which comes with an abstract of title, that is a copy of every time the property was transferred, possibly all the way back to before your state was officially a state.  That abstract may be stored with the title insurance company who prepared the abstract, or with an attorney who helped with the sale, or with the title insurance company.  You might try to get a look at that.

Otherwise, you either have to do some hands on research at the county, guess a basis and hope you arent' audited, or go with zero basis. 

[johnm40]

Thanks @Opus 17 !

[DavidD66]

s If the property was gifted to your both your parents by your grandparents, her original cost basis is their cost basis.  You cost basis depends on whether your father was alive or not when the property was given to you.  If your father had passed away at that time, then your mother would have received a step-up in basis for 50% of the value.  So, if the property was worth $100,000 at the time of your father's death, your mother's basis (and now yours) would be $50,000.  The other 50% would still be your grandparent's cost basis.  As Opus17 mentioned, the records are available from your county.  In addition to doing the research yourself,  you could hire someone to do a title search for you.  A local real estate attorney should be able to refer one to you.  And there is always the $0 cost basis option.

[Opus 17]

@DavidD66 

Good point, I missed that.

@johnm40 

From your question, 

"My mom gifted a piece of property to me that has been in our family for over 50 years.  I "believe" the property was gifted to her and my dad from my grandparents."

There is likely one part of the basis you can prove.  If your mother and father owned the property together, and your father died before your mother gave you the property, then your basis is half the fair market value on the day your father died.  

Basically, we start with the provable basis (zero).   But then when your father died, your mother got his "half" of the property with a stepped up basis equal to half the fair market value on that day.  And if your parents lived in a community property state, your mother got a fully stepped up basis.  You can determine the FMV on the date your father died by talking to a real estate appraiser, they can look at historical records and give you an estimate.  So your mother's half basis is still zero that you can prove, but the half-basis she inherited when your father died is something you probably can prove.   All this assuming they owned the house together when he died, of course.  If she was divorced, or was only given the house by her parents after she was single, then we are back to square one. 

[johnm40]

@DavidD66 - does your response only apply to a community property state?  The land in question is in Florida.  From what I gather FL is a common law state.

My father had already passed by the time my mom gifted the land to me.  

[Opus 17]

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@johnm40 wrote:

@DavidD66 - does your response only apply to a community property state?  The land in question is in Florida.  From what I gather FL is a common law state.

My father had already passed by the time my mom gifted the land to me.  

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In a community property state, your mom would get a full step up.  In a non-community property state, she gets a half step-up.  

Basically, start with the basis you can prove on the day before your father died (assuming the own the home together).  In your case, you can prove a basis of zero for your mother's half and zero for your father's half.  When your father died and your mother inherited his "half", she gets a stepped up basis equal to the fair market value on the date he died, but only half the step-up because she only inherited half the house.  So her new basis is (half the provable old basis, or zero) plus (half the FMV on the date your father died.)

You don't need county records for that, just a real estate estimate for the date your father died.  If you want to prove a higher basis for your mothers half, you need to dig deeper.

And, both of us forgot to mention, improvements also raise the basis, if you can prove their cost.  Like a new roof, new furnace, remodeling the kitchen, etc.  But only improvements still part of the house.  If the carpeting was replaced in 2000 and again in 2015, only the 2015 cost raises the basis. 

[DavidD66]

@johnm40  My answer applies to non-community property states, so it applies to Florida.  Surviving spouses in a community property state get a 100% step-up in basis.  So the 50% step-up would apply in your case.